India to grow 7.2% in 2021 (UN report)
India is expected to grow 7.2% in 2021, but economic growth could decelerate next year, according to a United Nations report which indicates that the country’s recovery is limited by the continued human and economic cost of the pandemic of Covid-19 and the negative impact of food price inflation on private consumption.
UNCTAD’s 2021 trade and development report, released here on Wednesday, sounded a cautiously optimistic note that the global economy is poised for a strong recovery in 2021, though great uncertainty cloud details at levels regional and national over the second half of the year.
After falling 3.5% in 2020, the United Nations Conference on Trade and Development (UNCTAD) expects world production to increase 5.3% this year, partly regaining ground lost in 2020.
The report says India “suffered a contraction” of 7% in 2020 and is expected to grow 7.2% in 2021.
“The recovery in India is limited by the current human and economic cost of Covid-19 and the negative impact of food price inflation on private consumption,” the UNCTAD report said.
The report predicts that India will experience economic growth of 6.7% in 2022, slower than the country’s expected growth rate in 2021.
However, even with a slower growth rate of 6.7%, India will remain the fastest growing large economy in the world next year.
“India, which experienced a 7.0% contraction in 2020, posted strong quarterly growth of 1.9% growth in the first quarter of 2021, supported by the momentum of the second half of 2020 and supported by public spending in goods and services. services, ”the report says.
“Meanwhile, a severe and largely unforeseen second wave of the pandemic, compounded by bottlenecks in vaccine deployment, hit the country in the second quarter, in addition to rising food price inflation and general, forcing general blockades and drastic adjustments in consumption and investment. , “It said.
He noted that income and wealth inequalities in the country have widened and “social unrest has increased”.
The Central Bank estimates another sharp contraction (quarter on quarter) in the second quarter followed by a rebound thereafter.
“Given the weaknesses inherent in the management of the pandemic and the restoration of jobs and income, growth in 2021 as a whole is estimated at 7.2%, insufficient to return to the level of income before COVID -19 “, the report reads.
“In the future, assuming a resurgence of the pandemic at the second wave level, a revitalization of private sector activity, still subject to a slow recovery in employment, should be accompanied by a political environment more unfavorable, in particular on the budgetary front, and with continued pressures on the trade balance. Under these conditions, the economy should slow down to 6.7% growth in 2022 “, indicates the report.
In addition, he said that in India, consumer inflation was already 6% before the pandemic. The Covid-19 shock caused a temporary drop in prices, but as the economy recovered and food prices accelerated, the country returned to an inflation rate of 6% in mid- 2021.
UNCTAD said global growth is expected to reach 5.3 percent this year, the fastest in nearly half a century, with some countries restoring – or even surpassing – their 2019 output levels by the end of 2021.
“The global situation beyond 2021, however, remains shrouded in uncertainty,” he said, adding that in the future, UNCTAD expects world production to increase by 3.6 % in 2022.
South Asia suffered a sharp 5.6% contraction in 2020 as the region’s economic activity crippled thanks to widespread restrictions.
Poor public health systems and high levels of informality amplified the impact of the pandemic in terms of health and economic outcomes, which was reflected in a sharp increase in poverty rates, according to the report. UNCTAD expects the region to expand 5.8% in 2021, with the stronger recovery reported at the start of the year being tempered by a rapid rise in infections in the second quarter of 2021.
In addition, the limited progress in vaccine deployment continues to leave countries in the region vulnerable to future epidemics. For 2022, UNCTAD expects the region’s growth rate to moderate to 5.7 percent.
The United States is expected to experience 5.7% growth in 2021, followed by 3% GDP growth next year.
“In the Americas, the rapid recovery in the United States is expected to bring GDP to 2% above its pre-Covid-19 level,” he said. China, whose growth is estimated at 8.3% this year, will see its growth slow to 5.7% in 2022.
The report says the world needs more effective multilateral coordination, without which recovery efforts in advanced countries will undermine development prospects in the South and exacerbate existing inequalities.
“The global recovery from the pandemic must go beyond emergency spending and investment in infrastructure to adopt a reinvigorated multilateral model for trade and development,” said Rebeca Grynspan, Secretary-General of UNCTAD.
“Only a concerted overhaul of priorities can hope to resolve the inequality and climatic crises that have defined our era.”